I understand your concerns re: dd1, but I don't think that owuld count as good reasoning to the LA.
would your dd2 understand that although her sister is in the same room, she is not to play with her all the time (if they play together) or pester her, rely on her etc? That is osmething you could make out was too confusing for dd2 (if that is the case)
Have you spoken to your case officer about htis?
And have you spoken to the SN school? do you know they are full for Sept? What is their turnover (ie, do they often have children for a yearor so before moving them on to units/MS etc) - would a place comeupin YR1 for your dd?
Ime, it makes little difference (as long as you have anoption for dd2 for this year) if a child joins a SN in Yr 1 and misses reception, as school so used ot differentiating anyway. But the same isnot true of MS, where after reception pace picks up quite a bit.
I know exactly how you are feeling - last Sept we learnt that LA named a pre-school for dd1 inher statement (she should have been going into Yr1!) adn I was gutted.
You canget through this, but I know how devastating it can be, and I know well about the worry aspect of it - it looked at one point like tbe LA was going to put dd into MS (she is ina SN school, with full 1-to-1 tuition)